The proverbial observation by the Privy Council is that the difficulties of a litigant begin when it obtains a decree. To obviate this, in the recent past, Indian courts have consistently adopted the "pro-enforcement" approach while considering foreign awards. The Supreme Court's clarion call that the enforcement of foreign awards can be interfered only in very exceptional cases has been followed in spirit by the High Courts.
Under the Arbitration and Conciliation Act, 1996 ("Act"), a party seeking enforcement of a foreign award can file a petition before the High Court1 which can decide questions forming the subject-matter of the arbitral award as if the same had been the subject-matter of a suit2. As is the case in most of these matters, the subject-matter of an arbitral award is predominantly money which has to be recovered through the court process. One of the bottlenecks in enforcing a foreign award has always been the territorial jurisdiction of a court where an enforcement petition could be filed by an award holder.
In this article, we discuss the law on territorial jurisdiction for enforcement of foreign awards as expounded in Glencore International AG v. Hindustan Zinc Limited3. In this case, the Delhi High Court ("DHC") ruled in favour of the award holder while hearing an objection that the court lacked territorial jurisdiction.
Disputes arose between Hindustan Zinc Limited, the judgment debtor ("JD") and Glencore International AG, the decree holder ("DH") in relation to contracts for supply of MRM concentrate. These disputes were referred to the London Court of International Arbitration which culminated into arbitration awards, and further awards on costs and interest on costs. The JD challenged the final awards before the Rajasthan High Court ("RHC") by filing applications under S.34 read with S.48 of the Act which were dismissed as not maintainable. The JD appealed against this judgment before the Division Bench of the RHC which was pending.
In the meantime, the DH filed two petitions before the DHC seeking enforcement of the awards on costs and interest on costs. The JD questioned the maintainability of these petitions on the ground that the DHC did not have territorial jurisdiction to entertain them as its assets were not located within the jurisdiction of the court and contended, among other grounds, that:
- The assets of JD are in Rajasthan and there are no assets in New Delhi. It is the DH's onus to identify the JD's property within the jurisdiction of the DHC. The only asset within the court's jurisdiction which was identified by the DH is a property in Lodhi Road in which the JD is a lessee.
- The Act contemplates a single executing court. As the JD's challenge to the enforceability of the awards was pending before the RHC (where JD's assets are located), the DHC should not entertain the enforcement petitions.
The DH submitted that the only relevant factor for establishing territorial jurisdiction for enforcing a foreign award is the location of JD's assets. The enforcement of a foreign award, subject-matter of which is money, can be done wherever the assets of the losing party are located4. Since the JD's assets are located within the jurisdiction of the court (office at Lodhi Road which has office furniture and machinery and movable properties such as cars, bank accounts etc.), the DHC has territorial jurisdiction. Further, the right to occupy or interest in JD's tenanted premises can be attached by a warrant of attachment. Even if the assets are insufficient to satisfy the decree (awards), this aspect will not be relevant to decide the maintainability of the enforcement petitions. The JD's objection that the enforcement petitions should be considered by the RHC is invalid because those proceedings challenging the enforcement of arbitration awards have been dismissed and the pendency of an appeal against the dismissal order does not automatically make the proceedings under S.48 of the Act sub-judice.
The DHC held that an enforcement petition is maintainable only where the properties/assets of the JD are located, which may or may not be the chosen place of the parties for the subject matter of arbitration5. Relying on the Supreme Court judgment in Brace Transport Corporation of Monrovia, Bermuda v. Orient Middle East Lines Ltd., Saudi Arabia & Ors.6, the DHC also held that a foreign award can be enforced anywhere depending on the location of the JD's assets or where his money lies, and this can be said to be in the nature of "Forum Hunting". As regards the JD's objection on the ground of pendency of proceedings before the RHC, the DHC held that those proceedings cannot come in the way of the DH enforcing the awards before the DHC in view of the law laid down in Eitzen Bulk A/S v. Ashpura Minechem Limited and Anr.7.
Consequently, the DHC prima facie upheld its jurisdiction to entertain the enforcement petitions on the basis that the JD did not deny that it has certain moveable assets and bank accounts within the court's jurisdiction. Further, the JD had admitted the existence of the office premises within the court's jurisdiction and there was no documentary evidence to show that the said premises were on lease. Accordingly, the JD was directed to file an affidavit disclosing all assets, including documents relating to the office premises alleged to be on lease. The court held that depending on the disclosure in the affidavit, the issue of territorial jurisdiction would be finally decided.
Foreign award holders, especially who do not have presence in India, are often faced with the dilemma of which High Court to approach for filing an enforcement petition. It is not uncommon for judgment debtors to dispose of or relocate their assets to defeat the enforcement of foreign awards. Of late, judgment debtors are seeking assistance of asset tracing agencies to first ascertain the location of the judgment debtor's assets and its value before embarking on the enforcement route. This helps the judgment debtor in narrowing down on the appropriate High Court(s) having territorial jurisdiction over the assets as well as to decide whether to file for enforcement at all.
The Glencore judgment goes a long way in reassuring foreign award holders that the threshold of establishing territorial jurisdiction of courts for enforcing foreign awards is not very high. It reinforces the principle that as long as an award holder can show that the judgment debtor has some assets within the jurisdiction of the court, even though some of their details may not be available at the time of filing the enforcement petition, the territorial jurisdiction of courts can be established. Glencore has given fillip to India's pro-enforcement outlook to foreign awards and will certainly instill confidence in foreign award holders seeking to enforce awards in India.
1 Under S.10(1) of the Commercial Courts Act, 2015, the commercial divisions of High Courts have jurisdiction to entertain applications for enforcement of awards arising out of international commercial arbitrations.
2 Explanation 1 to S.47 of the Arbitration and Conciliation Act, 1996
3 O.M.P (EFA) (COMM.) 9/2019, Ex. Appl. (OS) 875/2019 & O.M.P (EFA) (COMM.)10/2019, Ex. Appl. (OS) 876/2019 (decided on 8 June 2020)
4 Reliance was placed on Motorola Inc. v. Modi Wellvest 2005 (79) DRJ 173 (which followed the Supreme Court judgment in Brace Transport Corporation v. Orient Middle East Lines [1995 Supp (2) SCC 280]).
5 The expression "subject matter of arbitration" in the definition of "Court" in S. 2(1)(e) of the Act has to be contrasted with the expression "subject matter of the arbitral award" appearing in the Explanation to S.47 of the Act which defines "Court" for the purpose of enforcement of foreign awards.
6 1995 Supp (2) SCC 280.
7 (2016) 11 SCC 508. The Supreme Court upheld the Bombay High Court view that Section 42, appearing in Part I of the Act, requiring all applications to be filed in a court where an application has already been filed in connection with an arbitration agreement, does not apply to foreign awards.
Originally published 08 July, 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.